THE

LIBERTARIAN

ENTERPRISE

Is There a Doctor in the House?

"Please don't get sick and don't speed while driving," said a sign
posted in March at a medical center in Asan, South Korea. This isn't
typical medical advice in South Korea -- it was a warning to South
Koreans that a major strike by medical professionals was set to
commence.

For the last five months, the 70,000-member Korea Medical Association
has paralyzed health care in the country with a series of labor
strikes. As a result, an estimated 90% of the nation's 19,000
hospitals and clinics have closed at one time or another, reportedly
leading to the deaths of several people seeking medical help, the
arrests of doctors leading the strikes, and a major rift between
doctors and patients.

Medical professionals in South Korea are mostly angry about one
thing: The government-created monopoly that has allowed doctors and
pharmacists to line their own pockets at the expense of consumers may
be coming to an end.

The seeds of the crisis were planted in 1977, when the medical
insurance system was first introduced. In exchange for price controls
on medical care, doctors were allowed to supplement their incomes by
selling medicine. Doctors have complained to the succeeding South
Korean administrations that their fees are "unreasonably low." A
government spokesman recently acknowledged that medical fees fail to
cover about 20% of actual medical costs.

In addition to having a system that fails to cover medical fees, the
sale of over-the-counter medicine is also prohibited in South Korea.
If you have a headache or a stomachache in South Korea, you can't buy
medicine at the local supermarket or 7-11. Your only "choice" is to
visit a pharmacist or doctor. This government-created monopoly has
been good for both pharmacists and doctors, who were allowed to write
prescriptions and sell medicine to customers.

The result is that doctors and pharmacists have been over-prescribing
medicine. Expenditures on pharmaceutical products reportedly account
for about 30% of total medical costs in South Korea, much higher than
the 8.4% spent in the United States and 15% in the United Kingdom.

To make matters even worse, the South Korean government drives up the
cost of medical care by restricting the supply of doctors. Based on
1997 figures, there were 12 doctors for every 10,000 Koreans
(compared with 58 doctors in Italy, 34 in Germany, 30 in France, and
27 in the U.S., for every 10,000 people, respectively). In a
concession to angry doctors already practicing, the South Korean
government has proposed restricting even further the supply of
doctors.

The South Korean government has sought to tackle some of its
problems. It recently announced it would curtail over-prescribing by
dividing the duties of medical professionals. Since Aug. 1, doctors
have been prohibited from selling most medicines and pharmacists have
been prohibited from selling medicine without a doctor's
prescription.

This restriction, which re-ignited the strikes, makes sense within
the confines of the current system. As long as the sale of
over-the-counter drugs is prohibited, doctors and pharmacists should
be keeping tabs on one another instead of hanging on to prescription
regulations and price controls concocted by the government during the
1970s. And yet, while reducing some of the over-prescribing,
monitoring alone isn't the answer.

When it couldn't get the doctors and pharmacists to agree to its
reforms, the government started arresting doctors leading the strike,
as well as pharmacists selling medicine without prescriptions written
by doctors. Positions have only hardened. The Korean Medical
Association has made it clear that it will reserve the right to
strike as long as doctors are not allowed to sell medicine and
possess the exclusive right to write prescriptions. The nation's
50,000 pharmacists warn that they will go on strike if the government
gives in to demands by doctors. And President Kim Dae Jung has drawn
a line in the sand, insisting his administration "can never tolerate
selfishness on the part of interest groups through illegal and
violent means."

Few South Koreans are happy or satisfied with their health care
system. Why should the government be deciding what the roles of
doctors and pharmacists should be? Who should decide this, and who
will decide who makes that decision? For far too long the Korean
government has been doing the deciding, acting as judge, jury and
negotiator.

There are three things the South Korean government needs to do to
help end what appears to be a stalemate and head off a major medical
crisis. First, it should stop meddling in the health care industry.
The government has had a stranglehold on the market, acting as the
sole regulator of prices and services. But that would mean
recognizing that its previous policies are what led to the current
disaster in the first place. Its latest recommendations and
concessions (such as prohibiting pharmacists from selling certain
medicines unless they sell them in bulks of 30) hurt consumers. The
government needs to change its role as a micromanager of the system
to one limited to providing information. Doctors take the Hippocratic
Oath, "First Do No Harm." Mr. Kim's government needs to take a
similar pledge.

Two, the government should allow the sale of over-the-counter
medicine. This will help to break the monopoly doctors and
pharmacists have over medicine, giving their captive customers a
third option. What consumers need are more information and choices,
not knowledge monopolies and anti-consumer regulations.

Finally, the government needs to reform the entire medical insurance
industry. Holding down prices seemed to be a good bargain for
consumers, but price controls are now hurting them even more. Prices
are out of control and are what sparked the antipathy between doctors
and pharmacists. There is a Korean saying, "Every net has a hole."
Doctors and pharmacists have shown that they'll find a way around
price controls, or go on strike when the hole in the net is
temporarily covered.

There is no perfect solution to the impasse. But by busting the
monopolies and allowing medical fees to find their natural pricing in
a free market, it is much less likely that South Korea's doctors will
be posting signs in medical centers telling patients to go away.

From The Asian Wall Street Journal. Mr. Kweon, director of public
policy at the South Korea-based Center for Free Enterprise, is a
visiting scholar at the Cato Institute, in Washington, D.C. Mr.
Lartigue, a staff writer at the Cato Institute, worked as an educator
in South Korea for more than five years.

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